Sector Picks
Underweight
1) International Travel Related (Pretty Straightforward)
-Given how each area will still take some time to recover from Covid 19, it is rather unlikely there will be any large amount of travelling across boundaries any time soon.
-Not a fan of SATS because i believe that this year there is unlikely any dividend and there is always a chance recovery will be longer than what everyone thinks.(Given by how volatile the 1st half of the year is)
2) Brick and Mortar Retail (Pretty Straightforward again)
-Shift in Consumption patterns and preferences. Acceleration of online purchases.
3) Singapore Oil and Gas
-Not worth a bet on until at least break even is seen in companies like Sembcorp Marine
-Recent rights issue although indicate confidence in the company, does not mean that business will turnaround. In fact a major player needs to do rights should ring some bells towards the smaller cap players and those in the value chain. (Nordic for example)
4) Singapore Tourism Related
-Hotels are quite a straightforward reason as it is related to Point 1
-However, for companies that has local demand such as Genting Singapore and Straco, i think one has to measure how local demand will fare before making an informed decision. But as of July 2020, i am not really optimistic on Singapore's Covid 19 situation and hence i would rather stay away and review how the situation is in September 2020
5) Companies with productions in less developed countries
-I don't know if there is any sgx stocks that might fall under this but there is certainly a few in the Hong Kong Stock Exchange.
-The view is that less developed countries will have more problems dealing with Covid 19 and business resumptions. Also it makes shipping out of these countries more problematic and as such form supply chain issues.
6) Cash
-Cash in terms of keeping cash or investing. Cash for living expenses and emergency funds etc are not part of the classification.
-With lower rates globally and locally (Savings account cutting rates), there is less incentive to keep cash as the opportunity cost is much lower now.
Overweight
1) Games
-Thesis is that lack of travelling will lead to more usage of phones and computers. Driving up demand and usage of games.
-Highly Scalable, purchase of additional 'diamonds' in game using real life money does not incur additional cost onto the game unlike physical goods
-Even when one does not spent on in game credits, watching advertisements actually generates revenue for game companies.
2) China Domestic Demand
-Mainly producing in China for China's consumption companies related
-Although Covid 19 cases still happening in China, it has been 1 of the more successful countries.
-Local Demand, Logistics chain remain intact.
-Domestic Demand is actually very broad and some examples are : Property Companies, Living Essentials, Logistics.
3) Singapore Tech Manufacturing
-5G related companies should benefit as it is essential services and would have received JSS support as well.
-Consumption of technology should be higher under the lack of travelling circumstances and hence in turn drive up demand.
4) Singapore Real Estate
-Mainly a hedge against inflation and interest rates. Inflation will render cash less valuable and likely drive demand of real estates. Lower interest rates will likely drive cash-rich folks to invest in properties as well.
-Seen in China where real estate has recovered after Covid 19, i think it is likely to happen in Singapore as well.
5) Logistics (Self Explanatory)
-Part of the E-Commerce demand increase beneficiaries
6) Dividend Paying Stocks
-Lower interest rates means that such stocks should be in more demand
-However, for companies to pay dividend they most likely have to be doing well in terms of balance sheet and recording profits
-As such i would prefer companies which are likely to do well and are able to pay dividend.
-However i would likely turn away from companies which might have to cut their dividend due to poor results.
Equity Picks (Just my thoughts based on HK and SG Markets)
Will not go into details for each individual examples. I would be reachable via pm on Stockscafe if anyone has any queries.
